February 13, 2026
THIMPHU – Climate-induced loss and damage are costing Bhutan nearly seven percent of its gross domestic product (GDP) each year, according to the country’s first national assessment of the economic and social toll of climate change.
The study estimates average annual losses at 6.9 per cent of GDP – about 169.3 million U.S. dollars – and warns that escalating climate risks could cut national output by as much as three percentage points by 2050 if current trends continue.
Conducted by the Department of Environment and Climate Change under the Ministry of Energy and Natural Resources with support from the United Nations Development Programme, Bhutan, the assessment is the first comprehensive attempt to measure both economic and non-economic losses linked to climate change across all sectors and regions.
The losses include direct damage such as destroyed infrastructure and crop failures, as well as indirect impacts including disrupted livelihoods, reduced productivity, and declining ecosystem services.
Bhutan’s mountainous terrain, fragile ecosystems, dispersed settlements, and climate-dependent economy make the country highly vulnerable to both extreme weather events and slow-onset climate processes.
The report documents intensifying threats from glacial lake outburst floods, flash floods, landslides, windstorms and forest fires, alongside gradual shifts including glacier retreat, changing rainfall patterns, ecosystem degradation, and rising temperatures. These hazards are already affecting food and water security, hydropower systems, infrastructure, biodiversity and human well-being.
While large disasters often capture public attention, the study finds that repeated small-scale events, such as localised floods, landslides, and erratic rainfall, inflict cumulative damage that is frequently overlooked. Because many households absorb these shocks without formal reporting, the report suggests that official estimates likely understate the true scale of climate-related losses.
Beyond economic cost, the assessment also highlights non-economic impacts that are difficult to quantify but carry long-term consequences. These include mental health effects, disruptions to education, the erosion of cultural and spiritual heritage, biodiversity loss and weakening social cohesion. Such impacts, the report notes, are poorly captured in existing data systems despite their significance for Bhutan’s development philosophy centred on Gross National Happiness.
The study identifies six national loss and damage signatures: food and water insecurity driven by climate variability; health and wellbeing impacts; damage to infrastructure and property; degradation of terrestrial and freshwater ecosystems; energy insecurity linked to changing hydrology and glacier melt; and harm to cultural heritage. These effects often cascade across sectors, amplifying overall risk.
The assessment was developed through a participatory, country-led process involving national stakeholder workshops and consultations across all dzongkhags. This process resulted in Bhutan’s own definition of loss and damage, the identification of national loss and damage signatures, and the establishment of a National Loss and Damage Task Force.
Globally, loss and damage has become a central pillar of climate policy alongside mitigation and adaptation. It is recognised under Article 8 of the Paris Agreement, following the establishment of the Warsaw International Mechanism in 2013, the Santiago Network in 2019 and the launch of Fund for Responding to Loss and Damage at COP28 in 2023.
As of June 2025, that fund had attracted pledges of about 788.8 million dollars, a fraction of projected global needs, which researchers estimate could reach USD 1-1.7 trillion annually by 2050.
For Bhutan, which graduated from Least Developed Country status in 2023, the assessment comes at a critical time. Graduation reduces access to concessional finance even as climate risks intensify. With agriculture employing nearly 60 percent of the population and hydropower contributing about 13 percent of GDP and a significant share of government revenue, climate-induced losses pose serious risks to national development goals.
The report acknowledges limitations in the analysis, including fragmented data, underreporting of small-scale events and the absence of national attribution studies linking specific disasters directly to climate change. As a result, the reported figures probably underestimate the full extent of losses.
To address these gaps, the study recommends establishing a national loss and damage framework supported by a centralised data repository. It proposes building on existing systems such as the Risk and Resilience Portal, Climate Change Monitoring, Reporting and Verification system, Climate Services Toolkit, and Gross National Happiness surveys to improve tracking and reporting.
Despite Bhutan’s commitment to carbon neutrality and environmental conservation, the report concludes that the country is already experiencing unavoidable climate losses that cannot be addressed through mitigation and adaptation alone. It calls for stronger domestic coordination and sustained international financial and technical support to safeguard communities, ecosystems, and economic progress, while positioning Bhutan to engage more effectively in emerging global climate mechanisms.